AMENDMENTS TO PROVIDENT FUND SCHEME, PENSION SCHEME & EDLI SCHEME

The Ministry of Labour & Employment has issued notification dated 28th August, 2014 and clarification letters dated 29th August, 2014 amending the provisions of the Employees’ Provident Funds Scheme, 1952, the Employees’ Pension Scheme, 1995 and Employees Deposit Linked Insurance Scheme, 1976, which have come into force with effect from 1st September, 2014. Some of the relevant amendments under the said Schemes are as summarised below.

Under Employees’ Provident Funds Scheme, 1952

• The existing wage limit on which Provident Fund contributions are payable by the employer and employee on the employee pay has been increased from
Rs. 6,500/- to Rs. 1,500/-.

• Employees who are drawing basic salary above
Rs. 6,500/- and are enrolled under PF and intends to continue contributing towards PF need to submit joint undertaking.

• An employer would now be required to make mandatory PF contributions in respect of all employees whose pay is
Rs. 15,000/- or less (as opposed to Rs. 6,500/- or less). This amendment has widened the ambit of employees who would now be covered under the EPF Act.

Under Employees’ Pension Scheme, 1995

• Eligibility of employees under Pension Scheme has been increased from
Rs. 6,500/- per month to Rs. 15,000/- per month.

• Maximum Employer contribution towards pension scheme @ 8.33% has been increased from
Rs. 541/- to Rs. 1,250/-.

• New joiners drawing basic salary above
Rs. 15,000/- at the time of joining will not be eligible for EPS, 1995. However, if he/she is already a member of Pension with his/her previous employer and wishes to transfer his/her PF/EPS, he/she would continue to be a member of Pension Scheme subject to the condition that his/her pension contribution will be restricted to salary of
Rs. 15,000/- only.

• In case of existing employees, who are contributing towards pension scheme beyond the statutory limit and intends to continue contributing towards the pension scheme beyond the statutory limit, in their case they need to exercise the Fresh option of contributing towards pension scheme beyond
Rs. 1,500/-, within a period of 6 months from 1st September, 2014.

a) The employees, who opt for the aforesaid option, will have to contribute towards the Government share of contribution @ 1.16% on the salary exceeding
Rs. 15,000/- per month from his/her share of contribution.

EXAMPLE:

Description
Basic Salary of the employee	Rs. 25,000/- per month
Statutory limit for pension	Rs. 15,000/- per month
Basic Salary exceeds the Statutory limit of Rs. 15,000/- by	Rs. 10,000/- per month

EMPLOYEES SHARE OF CONTRIBUTION

Employers Share of contribution @ 12% of Rs. 25,000/-	Rs. 3,000/-
Out of 12% of Employers share 8.33% will be diverted towards pension i.e. 8.33% of Rs. 25,000/-	Rs. 2,082/-
Out of 12% of Employers share 3.67% will be Employers contribution towards PF i.e. 3.67% of Rs. 25,000/-	Rs. 917/-

EMPLOYEES SHARE OF CONTRIBUTION

Employees Share of contribution will be @ 12% of Rs. 25,000/-	Rs. 3,000/-
Employee has to pay @1.16% of differential amount of Rs. 10,000/- towards government share of contribution i.e. Rs. 10,000/- 1.16%	Rs. 116/-
Employees Share of PF contribution will be Rs. 3,000/- less Rs. 116/-i.e.	Rs. 2,884/-

b) If the employee fails to exercise the said option within 6 months from 1st Sept. 2014, it shall be deemed that the member has not opted for contribution beyond
Rs. 15,000/- to the pension fund and the contribution shall be diverted to the Provident Fund account of the member along with interest.

• The provision for contribution on higher salary has been deleted and as such no new options can be allowed to any member of the Employees’ Pension Scheme, 1995 on and after 1st September, 2014.

MINIMUM AMOUNT OF PENSION PAYABLE

• The minimum pension or relief payable to any existing or future member or in case of the member’s death to his widow/widower shall not be less than
Rs. 1,000/- per month for the financial year 2014-15.

• The minimum children pension for each child has been increased from
Rs. 150/- to Rs. 250/- for the financial year 2014-2015.

• The minimum monthly Orphan pension which is payable where a deceased member is out survived by any widow or where the pension is not payable to the widow (in case of remarriage) has also been increased from
Rs. 250/- to Rs. 750/- for the financial year 2014-2015.

COMPUTATION OF PENSIONABLE SALARY

• The pensionable salary (i.e. the salary based on which pension is to be computed) for all the cases of exit and death, will be average monthly pay drawn during the contributory period of service in the span of 60 months (originally it was 12 months) preceding the date of the exit from membership of the pension fund. However, in case of exit/death up to 31st August, 2014, average monthly pay drawn during the contributory period of service shall be 12 months.

• The pensionable salary shall be determined on a pro-rata basis for the pensionable service up to 31st August, 2014, subject to a maximum of
Rs. 6,500/- per month and for the period w.e.f. 1-9-2014, subject to the maximum of
Rs. 15,000/- per month. The same is applicable for withdrawal benefit.

UNDER EMPLOYEES DEPOSIT LINKED INSURANCE SCHEME, 1976

• EDLI wage limit enhanced from
Rs. 6,500/- to Rs. 15,000/-.

• Family members of the deceased member who has served in the same establishment for more than 12 months are entitled for higher EDLI benefits subject to maximum of
Rs. 3,00,000/- (20 times of Statutory limit i.e. Rs. 15,000/-) plus 20%.

• Deceased member who has served for less than 12 months, his family members are entitled for EDLI benefit subject to the maximum of
Rs. 1,00,000/- plus 20%.